As Germany weighs the pros and cons of phasing out its 1 and 2-cent coins, experts weigh in on whether these smallest euro coins are still necessary in today’s digital age.
Many countries have dropped low-denomination coins in the past, but can cash-loving Germany follow suit and stop accepting the smallest euro coins? Some argue that these coins are no longer necessary due to high production costs or their eroding purchasing power after inflation. Others claim they are a relic of the past, taking up space without adding value.
The Problem with Small Change
Banks have long complained that low-denomination coins do not get returned since people take them as change but do not actively spend them. As a result, the EU continues to mint new coins, including 40.1 billion 1-cent euro coins and 31.4 billion 2-cent euro coins in circulation.
A New Push for Change
The National Cash Forum, a group backed by the Bundesbank, recently called for Germany to drop its two smallest coins. The organization argues that this would lead to cost savings, efficiency, and even a reduced environmental impact due to less metal production.
The Case Against Small Denomination Coinage
Some argue that small-denomination coinage is necessary for accounting purposes, as many countries use a decimal system that goes all the way down to one-one-hundredth of a given unit. However, others claim that these coins do not add value and should be phased out.
Examples from Around the World
Several countries have already dropped small-denomination coins, including Albania, Algeria, Vietnam, Zambia, Australia, New Zealand, Canada (which eliminated its 1-cent coin in 2013), and the United States (which stopped minting its half-cent in 1857).
The Debate Continues
While some argue that eliminating small-denomination coins would reduce production costs and increase efficiency, others fear that it could lead to a loss of anonymity when using cash. In Germany, where cash remains the most frequently used means of payment, many consumers still prefer physical money.
In recent years, cash has continued to play an essential role in German transactions, with 51% of all payments made using cash in 2023. However, with online shopping and mobile payment methods becoming increasingly popular, cash use is slowly declining.
